The Advertising Agencies Association of India (AAAI) and the Indian Society of Advertisers (ISA) are working together to develop guidelines for the advertising industry to address the issue of “reverse auction” and other unethical practices affecting the sector. Highly placed sources told Storyboard18 that these guidelines are expected to be released this year.
A top executive from a media agency and AAAI member stated, “The reverse auction issue during the pitch process has severely impacted agencies. Brands initiate a pitch, then approach another agency to get a lower price than the first one, and so on, creating a chaotic situation. This is not only unethical but exploitation of the agencies”
The executive added, “AAAI and ISA have already held multiple meetings to discuss the reverse auction problem and other unethical industry practices. Both organizations are likely to release guidelines this year and are optimistic about implementing them in a collaborative manner.”
Storyboard18 reached out to AAAI and ISA for a comment, but both organizations did not respond to the queries.
Ashish Bhasin, founder of The Bhasin Consulting Group, emphasized the need for ethical standards: “It is crucial to establish a set of ethics or agreed-upon rules for all industry players. There must be a fair and level playing field for everyone. Unfortunately, some malpractices have emerged, including clients failing to pay agencies their full and fair commission. They have also introduced the absurd practice of reverse auctions, where pitches are often called just to drive rates down. These practices must be stopped immediately.”
Bhasin cited the example of Malaysia as a market that handled this issue best. “We even tried to learn from them. Years ago, they introduced a pitch fee for clients — even a token amount — which added a level of seriousness to the process. In contrast, India has seen the opposite happen. One client went so far as to demand that agencies pay to pitch for their business. Shockingly, some agencies were willing to comply,” said Bhasin, stating that he had refused to participate, as did several others. Eventually, the client was forced to withdraw the requirement. “But the fact that some agencies were willing to accept such terms is concerning,” he added.
Effectiveness of the Guidelines
When asked about the potential impact of the AAAI and ISA guidelines, Sandeep Goyal, Chairman of Rediffusion, responded, “The key question is: do AAAI and ISA have any punitive powers to penalize non-compliant parties? Such guidelines often end up as toothless declarations because there is no real enforcement. These unethical practices are damaging the advertising industry.”
Goyal further commented, “Ironically, these malpractices are perpetuated by larger players, as they have the resources to manipulate and ‘manage’ the system. They are the ones who negotiate hard with media partners to extract benefits at the client’s expense. And, of course, it is these big players who also control the industry associations.”
Traditional vs. New-Age Challenges
Veterans say that true change requires a collective commitment from both agencies and advertisers. If brands continue to prioritize cost-cutting over value, they risk compromising creativity, strategic insights, and long-term growth and success. The introduction of pitch fees and standardized media retainers, as seen in other markets, could offer a structured approach to tackling these issues.
Meenakshi Menon, Founder of GenSxty Tribe Pvt Ltd and former executive at Carat India, APAC, Zee TV, and Lintas India, offered a broader perspective: “Unity among agencies and transparency with media are both highly unlikely in my lifetime. This complex situation can only be addressed through dialogue and collective action.” Menon pointed out that ultimately, both advertisers and agencies lose out to unethical players.
“Advertisers may think they’ve won by securing extremely low rates, but those rates and that media placement often fail to deliver any real value.”
How do we define value? Asked Menon, arriving at a fundamental question facing the ad industry as a whole. Menon shared her biggest concern. With increasing ad avoidance and aggressive digital platform sales tactics, it’s becoming harder to separate the wheat from the chaff.
“In the end, clients pay the price — so does the consumer. The responsibility lies with advertisers. It’s their money being spent. They need to take control instead of blaming agencies or consultants. When clients make irrational decisions, I feel like telling them they’ve earned the right to be taken advantage of,” she added.
Collective strike
Rahul Vengalil, Chief Executive Officer and Co-Founder of TGTHR, offered a candid assessment of the challenges confronting modern advertising agencies. He lamented, “Undercutting remains the scourge of our industry. For years, we’ve heard complaints about dwindling margins, which have led to layoffs. Alternatively, talent is pushed to work excessive hours, often exceeding 100% of their capacity. It’s time for us to start respecting the time and effort that talent contributes.”
Vengalil called for a significant shift in the industry’s approach to creative work. “There needs to be a baseline cost structure for creative services that everyone adheres to,” he said. “Brands should stop shopping around for ideas across multiple agencies. It’s essential that we implement mandatory minimum turnaround times for both members and non-members of industry associations—especially considering that many smaller, independent agencies cannot afford membership dues.”
He continued by addressing the need for greater uniformity in the industry’s financial structures. “Media retainers and commission frameworks must be standardized. Much of the undercutting happens in these areas,” he explained. Vengalil also urged industry bodies like the Advertising Agencies Association of India (AAAI) and the Indian Society of Advertisers (ISA) to take a more proactive role in advocating for change. “These organizations should lead efforts to create conversations, training, and engagement programs to elevate our profession,” he stated, emphasizing that advertising agencies are far more than service providers—they are strategic partners in shaping brands’ creative and communication strategies.
The way ahead
As the advertising sector grapples with persistent ethical issues such as reverse auctions and undercutting, the growing collaboration between AAAI and ISA offers a potential turning point. While voluntary guidelines may lack the legal force of regulation, they lay the groundwork for fairer practices and greater accountability. Industry leaders assert that greater transparency, standardized processes, and fair compensation are essential to nurturing long-term, sustainable relationships between agencies and their clients